29 APR 2019
A new RICS report shows that valuers have a vital role in supporting the residential property market to place more emphasis on energy efficiency.
The RICS insight paper “Energy efficiency and residential values: a changing European landscape” funded by the European Union, looks at the impact energy efficiency has on the value of residential property in Europe, whether that housing stock is owner-occupied, rented within the private sector or social housing.
It considers the role of the valuer and how, through their data collection and reporting processes, they can play a part in promoting a more energy efficient housing stock.
The report explains how energy efficiency is beginning to impact on home prices, but that the impact is still small compared to traditional value drivers due to data unavailability, clients not knowing how to ask, valuers claiming they don’t have market evidence and that they ‘follow’ the market.
It also finds that specific, tangible measures like good quality window glazing may affect values more than consumer signals such as energy performance certificates.
“While there is evidence that energy efficient buildings offer cost savings to residents, the business case isn’t as strong for those who aren’t long-term owner-occupiers. The report points to some key impediments to making real progress on valuing energy efficiency and strengthening that business case.
These include a lack of strong energy data, some lack of clarity about the business case for upgrades, and inconsistent or unreliable government grants.
While these gaps exist, RICS professionals should be aware that the trend is for regulators across Europe to only tighten energy performance building standards, and that some lenders are beginning to factor in efficiency into their lending decisions,“ says Ursula Hartenberger, Head of Sustainability, RICS.
The vast majority of Europe’s buildings are residential. Since many of these dwellings were built before the introduction of energy performance regulations in the 1970s, they aren’t very energy efficient. In fact, an overwhelming 97% of Europe’s buildings are considered to be poor energy performers. What’s more, 40% of the EU’s energy consumption and 36% of its CO2 emissions can be laid at the doorstep of these buildings. Even more worryingly, more than three quarters of the current dwellings are expected to still be standing in 2050. Giving citizens incentives to improve the energy efficiency (EE) of their buildings is therefore a vitally important step in the EU’s efforts to mitigate climate change.
The report makes some key recommendations for our professionals to consider that will help address energy efficiency more quickly. These, alongside RICS’ other work to help the built environment become more sustainable, will be good for homeowners, investors, and our planet.
Apart from thought leadership, standards, training and events, RICS and its members have a key role delivering tangible and innovative market solutions and create synergies to reduce the impact of the built environment on our planet.
RICS is among the drivers of the Energy Efficient Mortgages initiative
Since 2017, RICS has been an active member of the EeMAP consortium - an EU-funded initiative considered as the most effective way of delivering mortgage financing solutions to support European citizens in making their homes more energy efficient, comfortable, secure and therefore, ultimately, future-proof.
Research presented by RICS as part of the EeMAP consortium shows that energy efficient buildings are both more comfortable for occupants and cheaper to run in terms of utility bills, leading to higher occupier satisfaction. Furthermore, there is also the green value in favour of those who invest in those sustainable homes. Making dwellings more energy efficient enhance the capital value of a property (the so-called ‘green premium’) or, if not, make them less susceptible to value loss (the so-called ‘brown discount’) over time.
Reports related to mortgage lending authored by RICS:
RICS has developed and runs a free training course on how to identify and apply energy efficiency and renewable energy factors into a valuation. Join the free course.